Seattle blows off Wells Fargo on $100 million City Light bond financing

Updated 3:24 pm, Friday, October 7, 2016

Photo: GENNA MARTIN, SEATTLEPI.COM

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Mayor Ed Murray and City Council President Bruce Harrell. Along with Council member Tim Burgess, they have told Wells Fargo that Seattle will no longer have the bank as lender on a $100 million Seattle City Light bond issue. The reason: A national scandal over Wells Fargo employees opening bogus accounts in customers' names. The city leaders say Wells Fargo must mend its ways and "make reparations." less

Mayor Ed Murray and City Council President Bruce Harrell. Along with Council member Tim Burgess, they have told Wells Fargo that Seattle will no longer have the bank as lender on a $100 million Seattle City ... more

Photo: GENNA MARTIN, SEATTLEPI.COM

Seattle blows off Wells Fargo on $100 million City Light bond financing

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The city of Seattle, citing "betrayal of public trust," will not work with Wells Fargo as lender on a $100 million bond financing for Seattle City Light, Mayor Ed Murray and City Council leaders told the beleaguered bank in a letter.

The reason is the bank's practice of opening accounts in customers' names without their knowledge or approval, for which Wells Fargo has paid a $185 million fine and seen its CEO John Stumpf taken to the woodshed at U.S. Senate and House hearings.

"The people of Seattle expect far better from the City's business partners," said the letter from Murray, City Council president Bruce Harrell and Council finance chair Tim Burgess.

Wells Fargo said it is "disappointed" at the city's decision to cancel its participation in the City Light bond issue, but voiced hope its 17-year-old relationship with the Emerald City can be restored.

"Our highly experienced and proven government banking, securities and treasury management teams stand ready to continue delivering outstanding service to the City of Seattle," said a statement from Ruben Pulido, vice president and communications manager.

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Two influential players in city politics -- SEIU labor leader David Rolf and entrepreneur Nick Hanauer -- launched an on-line petition last week demanding that Seattle to sever its ties with Wells Fargo.

Seattle is not alone in its actions. California State Treasurer John Chiang has suspended Wells Fargo from acting as managing underwriter in sale of state bonds, or broker-dealer in state investments.

Illinois State Treasurer Michael Frerichs announced Monday that his state is suspending its annual $30 billion in investment activity with Wells Fargo for at least a year in order to "send a message."

The city rolled out its outrage in the letter from Murray, Burgess and Harrell -- three figures at City Hall not usually given to grandstanding or pandering to radicals.

"As you know, following a competitive process, Wells Fargo was awarded a contract in 2013 to provide banking services to the City of Seattle," they wrote. "While this contractural relationship has met the City's banking needs, we were extremely disappointed to hear of the alleged unethical and likely illegal conduct that Wells Fargo has acknowledged engaging in."

Of particular concern, the city officials noted, was the strategy of opening accounts in customers names "was not only condoned by management, but encouraged." They went on to say:

"Your organization's underhanded practices greatly harm not only the customers who have been shouldered with bogus fees and unfairly reduced credit scores through no fault of their own, but also your reputation and relationship with your institutional customers, including the city of Seattle.

The customer then said it is taking its business elsewhere.

"In light of this, and effective immediately, we have concluded that we cannot continue to work with Wells Fargo as lender on the $100 million bond financing for Seattle City Light that was on track to close this month," wrote Murray, Harrell and Burgess.

The city did not close the door to future business with Wells Fargo.

A future relationship is predicated on Wells Fargo providing detailed information on how it will rectify the bogus accounts scandal, "make reparations to those harmed and ensure something like this will never happen again," the letter added.

In his response, Wells Fargo's Pulido noted that those who do business with the city had nothing to do with the bogus accounts.

"We manage the city's business in our Government & Institutional Banking division, which is separate from our retail bank," he wrote. "We are taking important steps to ensure that the sales culture in our retail banking business is 100 percent aligned with our customers' interests, including ending product sales goals for everyone . . ."

The city officials did voice appreciation to Wells Fargo for its work with Express Credit Union in providing financial education and services for low and middle-income households and the "unbanked." Still, said the City Hall trio, the bogus accounts "undermined our confidence in Wells Fargo as a trusted partner."

"Very strong initial response from the mayor," said petition author Rolf in reacting to the letter.

Columnist Joel Connelly has written about politics for the P-I since 1973.